India Ratings maintains stable outlook for solar projects

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India Ratings and Research (Ind-Ra) has maintained a Stable outlook for the Indian solar sector in FY2023-24 while maintaining a Negative outlook on wind power projects. It has revised the rating outlook for thermal assets to ‘Positive’ from ‘Stable.’

India added 14 GW of solar and 1.8 GW of wind power generation capacity in 2022, according to analysts.

Solar projects continue to have stable operations, adequate debt service coverage, and comfortable internal liquidity. The fall in module prices over the six months ended February 2023 is positive for under-construction projects; however, timely project completion is critical, stated the analysts.

Wind projects continue to be marred by generation variability. “Elimination of reverse auction is likely to allow developers bid with a better risk-return profile and improve the capacity addition in the medium term,” according to the analysts.

The rating agency expects counterparties such as Solar Energy Corp. of India Ltd, NTPC Ltd, and Gujarat Urja Vikas Nigam Ltd to continue making timely tariff payments.

“Projects selling directly to distribution companies (discoms) have had an elongated receivable cycle across counterparties; however subsequent to the implementation of the LPS [late payment surcharge] rules 2022, the overall receivables across the energy sector are likely to have reduced. Internal liquidity compared to the strength and diversification of counterparties is a key rating factor for all generation assets,” Ind-Ra stated.

Ind-Ra revised the outlook for thermal power projects to Positive based on an improvement in the electricity demand which could increase the plant load factor to above 65%, better visibility of coal cost pass-through, and adequate liquidity.

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